The government was recently claiming credit for successful "expenditure restraint" when announcing a somewhat better budget deficit outcome for 2016-17. However, while there was a slightly better management of some welfare spending, the expenditure result was mostly due to "timing", as some commitments on the NDIS and some infrastructure had not yet been spent, but will occur in future quarters.
But, this sort of "restraint" is really just "rats and mice" compared to the huge unfunded commitments running out decades in areas such as defence. The non-transparent, unaccountable, Defence procurement process (shielding scrutiny of critical aspects by claims of "classified information") is "corruptible" at many levels – precisely because a competent, independent, review and audit is non-existent.
The risk, for example, is compounded by the fact that "nice to have" capability or platform type can be managed and manipulated through the committee system and Cabinet approval process by nuanced presentations or submissions that mask or mitigate risk and eventually cost – and are not subject to proper competitive tenders under current procurement processes, that rapidly and subjectively (arguably deceptively) go to sole source selection at a very early concept design stage with no firm contractual obligations as to price or delivery.
The history of Defence procurement over the last decade should be screaming that "something is wrong" – the most recent "initiative" is the $50 billion submarine project, announced in haste in the run up to the last federal election, building on the "success" of its predecessor the Collins class debacle! The combined submarine and frigate projects could easily waste more than $200 billion of taxpayers' money over their lives.
The endless chain of reviews, mostly ignored, clearly suggests that Defence is incapable of self-regulation, objective evaluation, risk identification and technical appraisal. It seems to have little regard for the "value of money", or the need to strike the right cost/risk/capability balance insisted on by every review, but failed to be achieved.
Indeed, I have always been dismayed by the fact that Defence is the classic "untouchable", in the sense that it has generally been "ring fenced", allowed to operate to completely different standards, when it comes to expenditure approvals and commitments, monitoring and scrutiny, "efficiency dividends", and accountability. Defence has unfortunately developed an intellectual and technical arrogance and capacity for connivance so as to "get its own way", easily ignoring the greater good of the people.
The "Defence establishment" actually operates as if it is a world unto itself, with very little transparency or accountability. It provides the information and "evidence" to government on which Cabinet makes these huge, multi-decade, expenditure commitments, it controls the so called "tendering processes" for Defence contracts, and then the "relationships" with Defence contractors. If you then overlay this with political considerations, and "game playing", it is clear that it is a "corruptible" process.
More generally, the Defence establishment assumes "permanency" and "longevity", around which governments and ministers come and go. They have clearly played a part in the "turnover" of defence ministers and, I recall a few years ago, at a press conference on the appointment of a new defence minister, the head of the Defence Forces offering an assessment of the new minister, and "how he will go". Surely, the "Defence establishment" works for the government of the day, and certainly not the other way around!
Further, with incidents of anti-social, even criminal, behaviour within the "establishment", Defence always seeks to maintain "control", conducting at least the initial "investigations" in-house, seeking to avoid scrutiny of the relevant authorities.
The notional $50 billion future submarine project is our biggest Defence procurement project, yet it is already shrouded in controversy and confusion, driven by misinformation and a lack of detail and transparency. Initially, our government claimed that some 90 per cent would be constructed in Australia, but the French government expressed different views, so its now 60 per cent. It is not hard to imagine, that in the end, the French will gradually move most of the construction to France, claiming things such as a shortage of requisite skills in Australia, or whatever.
There is also confusion as to whether the submarines will be a "new build" or a "conversion", and about details such as "design", "size", and the "propulsion system", and there is considerable concern about the "capability gap" in the transition from the Collins class to its replacement, and about the decision to concentrate activity in one main shipyard, rather than source modules from several sites across the country. There is no fixed price, no formal local content requirements, and no delivery schedule.
Surely, "off-the-shelf" alternatives are worthy of genuine consideration at a fraction of the cost, with, early, delivery certainty?
The Abbott/Turnbull governments also have a significant case to answer given the step change in their acquisition strategy from Johnston/Abbott to Turnbull/Payne, and from Watt to Thawely, and Hockey to Morrison. The initial focus was on "value for money" and "risk/costs/capability trade-off", while the latter ignored the Kinnaird procurement recommendations, supporting a submarine project unbounded by risk or costs, and indeed whether we would have a submarine capability to confront a real and present threat in the appropriate timeframe.
I am concerned that we are at a point where a full, independent review of the "Defence establishment" is now an imperative, to achieve, at a minimum, genuine contestability in Defence projects.
John Hewson is a professor at the Crawford School of Public Policy, ANU, and a former Liberal opposition leader.